Allan Wilkinson updates Club on Brexit issues

HSBC’s Allan Wilkinson sets Brexit in context for packed meeting of members of The Farmers Club

BUILDING business resilience, collaborating to drive a whole industry agenda, and being bold about grasping Brexit opportunities was the theme of a stimulating address delivered by Allan Wilkinson, head of HSBC bank’s food chain department at The Farmers Club’s latest Monday Evening Lecture, writes Farmers Club Journal Editor Charles Abel.

Businesses need to be resilient to cope, and a key ingredient in that is viability. Whilst the UK had some of the best farm and food-chain businesses in the world, that was not consistent. “The gap between the top producers and the rest is the widest I have ever seen it, and much of that is down to cost base, which is within the gift of the people managing those businesses,” Mr Wilkinson said.

Being best in class, with no excuses, was the key. That meant benchmarking. Pig, poultry and horticulture farms had already embraced that, using precision farming technologies to achieve absolute attention to detail. “It means you are in profit before others, you are investing before others, you are in a position to seek out new opportunities before others, because your neighbour is still thinking about it. I’m afraid that’s how the world goes round, and it is how your customers think.”

Ireland had galvanised its agriculture over recent years, relentlessly measuring performance, setting objectives and working collaboratively to get things done, he added. “What gets measured gets done.”

He painted Brexit as a ‘global food opportunity’, provided the industry stepped up to demand its fair share of policy change, and set its own house in order.

The industry needed to be clear with policy-makers about what it wanted, he said. “We need to be bold, that we are going to set up the structures to do what needs doing, and to be first to do it, and to not take ten years to evolve into it. We need to jump to where we need to be. We don’t have five years to get there.”

Club chairman Tim Bennett agreed. “In negotiations with the Department for Business, Energy and Industrial Strategy, for a share of the £1bn being allocated to R&D, every other industry can reel off their top five priorities, but agriculture doesn’t seem to be able to do that yet.”

Whilst the UK food and farming sector was significant, employing 0.5m people up to the point of processing, and a further 3m to the point of delivery to consumers, there was an urgent need for it to be realistic about its efficiency, Mr Wilkinson noted.

“Since 2008 productivity has increased at half the rate of the rest of the economy, lagging somewhat behind Eire, Denmark, New Zealand and other outwardly looking agricultural economies,” he said.

“What do we want and how well equipped are we to deliver it,” he asked. “Brexit provides an opportunity to right the wrongs, and seize the opportunities, which are very demanding, but also potentially very rewarding.”

A sobering fact from business consultants Andersons was that over the past 20 years, without support payments, UK producers, on aggregate, had not made any profit from producing crops or raising livestock.

“We see staggering success on some farms, and performance far from what might be expected on others, and it often comes down to the management of the resources available,” he warned.

“And it is very hard to expect the food chain to pay more. They have fierce competition, with competition from places they have not seen before, and they are not in total control of their futures, as some might expect.”

He saw great potential for producers to not only seek to be best in class individually, but also to collaborate to move the whole industry forwards. “We have to seize this opportunity. We can wait for people to bring us the decisions, but we also, as an industry, need to stand up and make some of these moves and be bold in asking for things to happen, as I have seen other industries do.”

Of course, Brexit was not the only issue. Argentina’s revised soya crop estimates, following drought, highlighted the challenges of global food security. South East Asia, with 60% of the world’s population, but only a third of its freshwater, would exert more push and pull for resources, as populations and affluence increased, and diets shifted.

But the greatest opportunity remained the domestic market. “It is, and will be for our lifetimes, the most important market. Look after your customers, because if you don’t somebody else probably will.”

President Trump’s appointment of USDA secretary former Georgia governor Sonny Purdue, a farmer’s son, with veterinary training and a ‘keenness for trade’, would be significant.

The recent rumpus over the shortage of courgettes in supermarkets highlighted security of supply, something the UK food companies were keenly aware of. He worried that in the ensuing media debate the opportunity had not been seized to promote the UK food chain message.

China’s President Xi Jinping’s first attendance at the Davos economic summit, and his avowed interest in world trade, was a significant step too, given his country’s huge productivity, population and penchant for building food stocks.

Mr Wilkinson felt the very high regard consumers had for British food was a great strength. “We invent more new food products than France and Germany together. We didn’t just invent the sandwich, we invented its packaging and the gas inside to keep it fresher for longer.

“The exact reason why the food chain buys British food is the standards it is produced to. So I was slightly surprised to hear talk about reducing standards at the Oxford Farming Conference. Those standards help us in our domestic markets and with our exports too. We need to work more closely with the food chain to be best in class, not second or third.”

On science and technology he noted that the EU’s share of global R&D spend in agriculture had tumbled from 35% in the 1980s to just 7% now. Knowledge transfer was also lacking. “After decades of work mastitis is still endemic in 30% of dairy herds – what science do we need to move the industry on?”

Looking to broader economic issues he felt Sterling, the Dollar and the Euro would move towards parity, but urged listeners to look at the assumptions driving that process, rather than just the figures. Land prices in the UK would be unlikely to change much, given limited supply and continuing demand from investors with large cash funds.

“Those farmers that change will survive,” he felt. “Confidence is going to be crucial, and leadership more important than ever. Be bold,” he concluded.

A wide range of useful documents is included in the Club’s Brexit Toolkit, which can be found in the Library section of the Club website at www.thefarmersclub.com/brexit

During 2017 the Club’s increasingly popular Monday Evening Lectures will provide more excellent opportunities for members to secure privileged Brexit insights, and provide direct feedback to those involved in the framing of farming’s new policies. Details can be found on our Events page.

The Club will also make available good Brexit commentary and well-informed opinion, using the Club Journal, website and social media postings, to help members anticipate and react to Brexit opportunities, and identify and adjust to Brexit threats.

The Club is an ideal place, as ever, for formal and less formal meetings with those who will shape future agricultural policy. But the Club will not make representations on its own behalf. Its interest is to foster better understanding – for members and policy-makers alike.